(1) Aggregate effective rate of tax. -- The term "aggregate
effective rate of tax" shall mean the sum of the effective rates of
tax imposed by a state or United States possession or any
combination thereof on a related member.

(2) Business income. -- The term "business income" means
income arising from transactions and activity in the regular course
of the taxpayer's trade or business and includes income from
tangible and intangible property if the acquisition, management and
disposition of the property or the rendering of services in
connection therewith constitute integral parts of the taxpayer's
regular trade or business operations and includes all income which
is apportionable under the Constitution of the United States.

(B) Are more than fifty percent of the voting power or value
of the beneficial interests or shares of which are owned or
controlled, directly or indirectly or constructively, by a single
entity that is:

(i) Treated as an association taxable as a corporation under
the Internal Revenue Code of 1986, as amended; and

(ii) Not exempt from federal income tax pursuant to the
provisions of Section 501(a) of the Internal Revenue Code of 1986,
as amended;

(C) For purposes of applying subparagraph (i), paragraph (B)
of this subdivision, the following entities are not considered an
association taxable as a corporation:

(i) Any real estate investment trust as defined in Section 856
of the Internal Revenue Code of 1986, as amended, other than a
"captive real estate investment trust";

(ii) Any qualified real estate investment trust subsidiary
under Section 856(i) of the Internal Revenue Code of 1986, as
amended, other than a qualified real estate investment trust
subsidiary of a "captive real estate investment trust";

(iii) Any listed Australian property trust, meaning an
Australian unit trust registered as a "managed investment scheme"
under the Australian Corporations Act in which the principal class
of units is listed on a recognized stock exchange in Australia and
is regularly traded on an established securities market, or an
entity organized as a trust, provided that a listed Australian
property trust owns or controls, directly or indirectly,
seventy-five percent or more of the voting power or value of the
beneficial interests or shares of the trust; or

(iv) Any qualified foreign entity, meaning a corporation,
trust, association or partnership organized outside the laws of the
United States and which satisfies the following criteria:

(1) At least seventy-five percent of the entity's total asset
value at the close of its taxable year is represented by real
estate assets as defined in Section 856(c)(5)(B) of the Internal
Revenue Code of 1986, as amended, thereby including shares or
certificates of beneficial interest in any real estate investment
trust, cash and cash equivalents and United States government
securities;

(2) The entity is not subject to tax on amounts distributed to
its beneficial owners or is exempt from entity-level taxation;

(3) The entity distributes at least eighty-five percent of its
taxable income as computed in the jurisdiction in which it is
organized to the holders of its shares or certificates of
beneficial interest on an annual basis;

(4) Not more than ten percent of the voting power or value in
the entity is held directly or indirectly or constructively by a
single entity or individual or the shares or beneficial interests
of the entity are regularly traded on an established securities
market; and

(5) The entity is organized in a country which has a tax
treaty with the United States.

(D) A real estate investment trust that is intended to be
regularly traded on an established securities market, and that
satisfies the requirements of Section 856(a)(5) and (6) of the U.S.
Internal Revenue Code by reason of Section 856(h)(2) of the
Internal Revenue Code is not considered a captive real estate investment trust within the meaning of this section.

(E) A real estate investment trust that does not become
regularly traded on an established securities market within one
year of the date on which it first becomes a real estate investment
trust is not considered not to have been regularly traded on an
established securities market, retroactive to the date it first
became a real estate investment trust, and shall file an amended
return reflecting the retroactive designation for any tax year or
part year occurring during its initial year of status as a real
estate investment trust. For purposes of this section, a real
estate investment trust becomes a real estate investment trust on
the first day that it has both met the requirements of Section 856
of the Internal Revenue Code and has elected to be treated as a
real estate investment trust pursuant to Section 856(c)(1) of the
Internal Revenue Code.

(4) Combined group. -- The term "combined group" means the
group of all persons whose income and apportionment factors are
required to be taken into account pursuant to subsection (j) or
(k), section thirteen-a of this article in determining the
taxpayer's share of the net business income or loss apportionable
to this state.

(5) Commercial domicile. -- The term "commercial domicile"
means the principal place from which the trade or business of the
taxpayer is directed or managed: Provided, That the commercial
domicile of a financial organization, which is subject to regulation as such, shall be at the place designated as its
principal office with its regulating authority.

(6) Compensation. -- The term "compensation" means wages,
salaries, commissions and any other form of remuneration paid to
employees for personal services.

(7) Corporation. -- "Corporation" means any corporation as
defined by the laws of this state or organization of any kind
treated as a corporation for tax purposes under the laws of this
state, wherever located, which if it were doing business in this
state would be subject to the tax imposed by this article. The
business conducted by a partnership which is directly or indirectly
held by a corporation shall be considered the business of the
corporation to the extent of the corporation's distributive share
of the partnership income, inclusive of guaranteed payments to the
extent prescribed by regulation. The term "corporation" includes
a joint-stock company and any association or other organization
which is taxable as a corporation under the federal income tax law.

(8) Delegate. -- The term "delegate" in the phrase "or his or
her delegate", when used in reference to the Tax Commissioner,
means any officer or employee of the State Tax Division duly
authorized by the Tax Commissioner directly, or indirectly by one
or more redelegations of authority, to perform the functions
mentioned or described in this article or regulations promulgated
thereunder.

(9) Domestic corporation. -- The term "domestic corporation" means any corporation organized under the laws of West Virginia and
certain corporations organized under the laws of the state of
Virginia before June 20, 1863. Every other corporation is a
foreign corporation.

(10) Effective rate of tax. -- The term "effective rate of
tax" means, as to any state or United States possession, the
maximum statutory rate of tax imposed by the state or possession on
a related member's net income multiplied by the apportionment
percentage, if any, applicable to the related member under the laws
of said jurisdiction. For purposes of this definition, the
effective rate of tax as to any state or United States possession
is zero where the related member's net income tax liability in said
jurisdiction is reported on a combined or consolidated return
including both the taxpayer and the related member where the
reported transactions between the taxpayer and the related member
are eliminated or offset. Also, for purposes of this definition,
when computing the effective rate of tax for a jurisdiction in
which a related member's net income is eliminated or offset by a
credit or similar adjustment that is dependent upon the related
member either maintaining or managing intangible property or
collecting interest income in that jurisdiction, the maximum
statutory rate of tax imposed by said jurisdiction shall be
decreased to reflect the statutory rate of tax that applies to the
related member as effectively reduced by the credit or similar
adjustment.

(11) Engaging in business. -- The term "engaging in business"
or "doing business" means any activity of a corporation which
enjoys the benefits and protection of government and laws in this
state.

(12) Federal Form 1120. -- The term "Federal Form 1120" means
the annual federal income tax return of any corporation made
pursuant to the United States Internal Revenue Code of 1986, as
amended, or in successor provisions of the laws of the United
States, in respect to the federal taxable income of a corporation,
and filed with the federal Internal Revenue Service. In the case
of a corporation that elects to file a federal income tax return as
part of an affiliated group, but files as a separate corporation
under this article, then as to such corporation Federal Form 1120
means its pro forma Federal Form 1120.

(13) Fiduciary. -- The term "fiduciary" means, and includes,
a guardian, trustee, executor, administrator, receiver, conservator
or any person acting in any fiduciary capacity for any person.

(A) A holding company or a subsidiary thereof. As used in
this section "holding company" means a corporation registered under
the federal Bank Holding Company Act of 1956 or registered as a
savings and loan holding company other than a diversified savings
and loan holding company as defined in Section 408(a)(1)(F) of the
federal National Housing Act, 12 U.S.C. §1730(a)(1)(F);

(B) A regulated financial corporation or a subsidiary thereof.
As used in this section "regulated financial corporation" means:

(i) An institution, the deposits, shares or accounts of which
are insured under the Federal Deposit Insurance Act or by the
federal Savings and Loan Insurance Corporation;

(ii) An institution that is a member of a federal home loan
bank;

(iii) Any other bank or thrift institution incorporated or
organized under the laws of a state that is engaged in the business
of receiving deposits;

(iv) A credit union incorporated and organized under the laws
of this state;

(III) Mortgages or other loans secured by real estate or tangible personal property;

(IV) Credit card loans;

(V) Secured and unsecured commercial loans of any type; and

(VI) Loans arising in factoring;

(ii) Leasing or acting as an agent, broker or advisor in
connection with leasing real and personal property that is the
economic equivalent of an extension of credit as defined by the
Federal Reserve Board in 12 CFR 225.25(b)(5);

(iii) Operating a credit card business;

(iv) Rendering estate or trust services;

(v) Receiving, maintaining or otherwise handling deposits;

(vi) Engaging in any other activity with an economic effect
comparable to those activities described in subparagraph () (i),
(ii), (iii), (iv) or (v) of this paragraph.

(15) Fiscal year. -- The term "fiscal year" means an
accounting period of twelve months ending on any day other than the
last day of December and on the basis of which the taxpayer is
required to report for federal income tax purposes.

(16) Includes and including. -- The terms "includes" and
"including", when used in a definition contained in this article,
do not exclude other things otherwise within the meaning of the
term being defined.

(17) Insurance company. -- The term "insurance company" means
any corporation subject to taxation under section twenty-two,
article three, chapter twenty-nine of this code or chapter thirty-three of this code or an insurance carrier subject to the
surcharge imposed by subdivision (1) or (3), subsection (f),
section three, article two-c, chapter twenty-three of this code or
any corporation that would be subject to taxation under any of
those provisions were its business transacted in this state.

(18) Intangible expense. -- The term "intangible expense"
includes: (A) Expenses, losses and costs for, related to or in
connection directly or indirectly with the direct or indirect
acquisition, use, maintenance or management, ownership, sale,
exchange or any other disposition of intangible property to the
extent those amounts are allowed as deductions or costs in
determining taxable income before operating loss deductions and
special deductions for the taxable year under the Internal Revenue
Code; (B) amounts directly or indirectly allowed as deductions
under Section 163 of the Internal Revenue Code for purposes of
determining taxable income under the Internal Revenue Code to the
extent those expenses and costs are directly or indirectly for,
related to or in connection with the expenses, losses and costs
referenced in subdivision (A) of this subsection; (C) losses
related to, or incurred in connection directly or indirectly with,
factoring transactions or discounting transactions; (D) royalty,
patent, technical and copyright fees; (E) licensing fees; and (F)
other similar expenses and costs.

(20) Interest expense. -- "Interest expense" means amounts
directly or indirectly allowed as deductions under Section 163 of
the Internal Revenue Code for purposes of determining taxable
income under the Internal Revenue Code.

(21) "Internal Revenue Code" means the Internal Revenue Code
as defined in section three of this article, as amended and in
effect for the taxable year and without regard to application of
federal treaties unless expressly made applicable to states of the
United States.

(22) Nonbusiness income. -- The term "nonbusiness income"
means all income other than business income.

(23) Ownership. -- In determining the ownership of stock,
assets or net profits of any person, the constructive ownership of
Section 318(a) of the Internal Revenue Code of 1986, as amended, as
modified by Section 856(d)(5) of the Internal Revenue Code of 1986,
as amended, shall apply.

(24) "Partnership" means a general or limited partnership or
organization of any kind treated as a partnership for tax purposes
under the laws of this state.

(25) Person. -- The term "person" is considered
interchangeable with the term "corporation" in this section. The
term "person" means any individual, firm, partnership, general
partner of a partnership, limited liability company, registered limited liability partnership, foreign limited liability
partnership, association, corporation whether or not the
corporation is, or would be if doing business in this state,
subject to the tax imposed by this article, company, syndicate,
estate, trust, business trust, trustee, trustee in bankruptcy,
receiver, executor, administrator, assignee or organization of any
kind.

(26) Pro forma return. -- The term "pro forma return" when
used in this article means the return which the taxpayer would have
filed with the Internal Revenue Service had it not elected to file
federally as part of an affiliated group.

(27) Public utility. -- The term "public utility" means any
business activity to which the jurisdiction of the Public Service
Commission of West Virginia extends under section one, article two,
chapter twenty-four of this code.

(28) Qualified regulated investment company. -- The term
"qualified regulated investment company" means any regulated
investment company other than a regulated investment company where
more than fifty percent of the voting power or value of the
beneficial interests or share of which are owned or controlled,
directly or indirectly, constructively or otherwise, by a single
entity that is:

(A) Subject to the provision of subchapter C, chapter 1,
subtitle A, Title 26 of the United States Code, as amended;

(B) Not exempt from federal income tax pursuant to the provision of Section 501 of the Internal Revenue Code of 1986, as
amended; and

(C) Not a regulated investment company as defined in Section
3 of the Investment Company Act of 1940, as amended, 15 U.S.C.
80a-3: Provided, That a regulated invested company, the shares of
which are held in a segregated asset account of a life insurance
corporation (as described in Section 817 of the Internal Revenue
Code of 1986, as amended), shall be treated as a qualified
regulated investment company.

(29) Real estate investment trust. -- The term "real estate
investment trust" has the meaning ascribed to such term in Section
856 of the Internal Revenue Code of 1986, as amended.

(30) Regulated investment company. -- The term "regulated
investment company" has the same meaning as ascribed to such term
in Section 851 of the Internal Revenue Code of 1986, as amended.

(31) Related entity. -- "Related entity" means: (A) A
stockholder who is an individual or a member of the stockholder's
family set forth in Section 318 of the Internal Revenue Code if the
stockholder and the members of the stockholder's family own,
directly, indirectly, beneficially or constructively, in the
aggregate, at least fifty percent of the value of the taxpayer's
outstanding stock; (B) a stockholder, or a stockholder's
partnership, limited liability company, estate, trust or
corporation, if the stockholder and the stockholder's partnerships,
limited liability companies, estates, trusts and corporations own directly, indirectly, beneficially or constructively, in the
aggregate, at least fifty percent of the value of the taxpayer's
outstanding stock; or (C) a corporation, or a party related to the
corporation in a manner that would require an attribution of stock
from the corporation to the party or from the party to the
corporation under the attribution rules of the Internal Revenue
Code if the taxpayer owns, directly, indirectly, beneficially or
constructively, at least fifty percent of the value of the
corporation's outstanding stock. The attribution rules of the
Internal Revenue Code shall apply for purposes of determining
whether the ownership requirements of this definition have been
met.

(32) Related member. -- "Related member" means a person that,
with respect to the taxpayer during all or any portion of the
taxable year, is: (A) A related entity; (B) a component member as
defined in subsection (b), Section 1563 of the Internal Revenue
Code; (C) a person to or from whom there is attribution of stock
ownership in accordance with subsection (e), Section 1563 of the
Internal Revenue Code; or (D) a person that, notwithstanding its
form or organization, bears the same relationship to the taxpayer
as a person described in subdivisions (A) through (C), inclusive,
of this subsection.

(33) Sales. -- The term "sales" means all gross receipts of
the taxpayer that are "business income" as defined in this section.

(34) State. -- The term "state" means any state of the United States, the District of Columbia, the Commonwealth of Puerto Rico,
any territory or possession of the United States and any foreign
country or political subdivision thereof.

(35) Tax. -- The term "tax" includes, within its meaning,
interest and additions to tax, unless the intention to give it a
more limited meaning is disclosed by the context.

(36) Taxable year, tax year. -- The term "taxable year" or
"tax year" means the taxable year for which the taxable income of
the taxpayer is computed under the federal income tax law.

(37) Tax Commissioner. -- The term "Tax Commissioner" means
the Tax Commissioner of the State of West Virginia or his or her
delegate.

(38) Tax haven. -- The term "tax haven" means a jurisdiction
that, for a particular tax year in question: (A) Is identified by
the Organization for Economic Cooperation and Development as a tax
haven or as having a harmful preferential tax regime; or (B) a
jurisdiction that has no, or nominal, effective tax on the relevant
income and: (i) That has laws or practices that prevent effective
exchange of information for tax purposes with other governments
regarding taxpayers subject to, or benefitting from, the tax
regime; (ii) that lacks transparency. For purposes of this
definition, a tax regime lacks transparency if the details of
legislative, legal or administrative provisions are not open to
public scrutiny and apparent or are not consistently applied among
similarly situated taxpayers; (iii) facilitates the establishment of foreign-owned entities without the need for a local substantive
presence or prohibits these entities from having any commercial
impact on the local economy; (iv) explicitly or implicitly excludes
the jurisdiction's resident taxpayers from taking advantage of the
tax regime's benefits or prohibits enterprises that benefit from
the regime from operating in the jurisdiction's domestic market; or
(v) has created a tax regime which is favorable for tax avoidance,
based upon an overall assessment of relevant factors, including
whether the jurisdiction has a significant untaxed offshore
financial or other services sector relative to its overall economy.
For purposes of this definition, the phrase "tax regime" means a
set or system of rules, laws, regulations or practices by which
taxes are imposed on any person, corporation or entity, or on any
income, property, incident, indicia or activity pursuant to
governmental authority.

(39) Taxpayer. -- The term "taxpayer" means any person subject
to the tax imposed by this article.

(40) This code. -- The term "this code" means the Code of West
Virginia, 1931, as amended.

(41) This state. -- The term "this state" means the State of
West Virginia.

(42) "United States" means the United States of America and
includes all of the states of the United States, the District of
Columbia and United States territories and possessions.

(43) "Unitary business" means a single economic enterprise that is made up either of separate parts of a single business
entity or of a commonly controlled group of business entities that
are sufficiently interdependent, integrated and interrelated
through their activities so as to provide a synergy and mutual
benefit that produces a sharing or exchange of value among them and
a significant flow of value to the separate parts. For purposes of
this article and article twenty-three of this chapter, any business
conducted by a partnership shall be treated as conducted by its
partners, whether directly held or indirectly held through a series
of partnerships, to the extent of the partner's distributive share
of the partnership's income, regardless of the percentage of the
partner's ownership interest or the percentage of its distributive
or any other share of partnership income. A business conducted
directly or indirectly by one corporation through its direct or
indirect interest in a partnership is unitary with that portion of
a business conducted by one or more other corporations through
their direct or indirect interest in a partnership if there is a
synergy and mutual benefit that produces a sharing or exchange of
value among them and a significant flow of value to the separate
parts and the corporations are members of the same commonly
controlled group.

(44) West Virginia taxable income. -- The term "West Virginia
taxable income" means the taxable income of a corporation as
defined by the laws of the United States for federal income tax
purposes, adjusted, as provided in this article: Provided, That in the case of a corporation having income from business activity
which is taxable without this state, its "West Virginia taxable
income" shall be the portion of its taxable income as defined and
adjusted as is allocated or apportioned to this state under the
provisions of this article.

(45) Valid business purpose. -- "Valid business purpose" means
one or more business purposes, other than the avoidance or
reduction of taxation, which alone or in combination constitute the
primary motivation for a business activity or transaction, which
activity or transaction changes in a meaningful way, apart from tax
effects, the economic position of the taxpayer. The economic
position of the taxpayer includes an increase in the market share
of the taxpayer or the entry by the taxpayer into new business
markets.

(b) Effective date. -- The amendments to this section made in
the year 2009 are retroactive and are effective for tax years
beginning on and after January 1, 2009.

Note: WV Code updated with legislation passed through the 2014 1st Special Session
The WV Code Online is an unofficial copy of the annotated WV Code, provided as a convenience. It has NOT been edited for publication, and is not in any way official or authoritative.